Friday, Nov. 20
Posted 4 p.m. EST
Bankrate reporter Leslie McFadden contributed this entry.
Happy Friday! Lots of credit card news this week. Here it goes.
Citi offers rebate on interest charges: The Associated Press reported Thursday that Citi is offering some customers faced with rate hikes a chance to get a rebate on their interest charges for the month if they meet a minimum monthly spending requirement. In some cases, consumers would have to spend $750 a month to qualify.
Citi told the AP that about half of their customers could offset 50 percent to 100 percent of their interest rate increases in this way.
So, in other words, if you spend a certain amount each month, you'll get a rebate on your finance charges. Fall short of the threshold and you get nothing back.
It doesn't make much sense for people to spend even more than they normally would to save. Escalating balances can also depress your credit score and cause other rate hikes and credit limit reductions. The smart thing to do is pay down high-interest debt and in the future try to keep balances reasonable.
Credit card marketing picks up: New research from Mintel Comperemedia shows signs of life in credit card marketing. The firm found that the volume of credit card direct mail is ticking up again. Issuers sent 180 million solicitations last month to American households -- the highest total since last December. The volume of offers sent in October was 34 percent higher than the previous month, the sharpest month-to-month rise since direct mail volume made a comeback after the 2001 recession in early 2004.
Mintel noted that Chase and American Express did the heaviest amount of marketing.
No rate freeze: A bill that would have frozen interest rates on existing credit card balances died in the Senate this week. That means cardholders will remain vulnerable to rate hikes on existing balances until the bulk of the CARD Act provisions take effect in February.
Look out for communication from your card issuer about how the CARD Act will affect your account. One of my colleagues recently noticed that American Express has a new primer on its Web site that explains some of the coming changes under the CARD Act.
Speaking of AmEx: The credit card giant has moved to purchase alternative payments company Revolution Money for about $300 million. The RevolutionCard from the Florida-based firm offers a lower interchange fee than traditional credit cards, and carries no account number or customer name on it. Consumers type in a PIN code to use it, like a debit card. Accountholders could also use the MoneyExchange online payment service to transfer money to other users fee-free.
Interchange-fee reform? The U.S. Government Accountability Office issued its report on Thursday on interchange fees, which are charges paid to banks and payment networks such as Visa and MasterCard every time customers swipe their debit or credit cards. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 had required the GAO to examine merchant fees and weigh in on possible reform.
Interchange fees generally range from 1 percent to 3 percent of the purchase price, according to the report. The amount comes out of the sale and goes to the merchant's bank, the card issuer and the payment network that processes the transaction. Rewards cards usually have higher rates than other credit cards, and debit cards generally have lower rates than credit cards.
Some retailers have claimed that the fees cut into their profits and inflate the price of goods and services for everyone, even those who pay with cash.
The GAO study agreed that "consumers who do not use credit cards may be paying higher prices for goods and services, as merchants pass on their increasing card acceptance costs to all of their customers."
A separate study released Thursday from the Hispanic Institute echoed that same finding. Their analysis found that "the bottom 50 percent of earners pay an additional $669 million for basic consumer products as a result of businesses raising prices to compensate for merchant fees. Meanwhile, the top 10 percent of earners get an additional $354 million in card perks, which are heavily financed by these fees," according to their press release.
Yet the GAO report concluded that reform of interchange fees, such as limiting or setting fees and allowing merchants and card issuers to negotiate rates, would be difficult to implement, and cost savings for consumers would be hard to gauge. You can read the full report here.
Readers, do you find interchange fees unfair or worth the convenience of paying with cards?
Questions? Comments? E-mail plastic_rap@bankrate.com.
Read all of the Plastic Rap blog entries.